The boss of Australia’s fourth biggest bank believes the nation will escape the negative economic growth conditions that are set to afflict other major economies because it is closely aligned to regional powerhouse China.
But recessionary conditions around the world are still likely to cut back Australia’s growth prospects to a below average two per cent.
ANZ chief executive Mike Smith today joined his peer John Stewart of National Australia Bank Ltd in playing down a recession, although he agrees economic conditions are still likely to be tough.
“We will not go into recession,” he said as ANZ released its annual profit results.
“We will definitely slow on the back of the global slowdown, but it’s better to be aligned with China and Asia than with the US or Europe,” Mr Smith told journalists.
ANZ today reported its first annual profit fall in 10 years as the bank was battered by the global credit crisis, resulting in increased in bad debts and paper losses on sophisticated debt obligations.
Net profit fell 21 per cent to $3.32 billion in fiscal year 2008, the first fall since 1998.
National Australia Bank, which on Tuesday announced a 0.9 per cent fall in fiscal 2008 net profit to $3.92 billion, also believes Australia can escape a full blown recession in 2009.
“With any luck, we’ll stave off a recession, (although) it might feel like a recession,” Mr Stewart said on Tuesday.
ANZ economists are forecasting economic growth to recede to an annual rate of 1.8 per cent next year, from a current 2.7 per cent.
NAB is betting on slower growth of 1.25 per cent.
Finance minister Lindsay Tanner earlier this week pointed to sub-two per cent growth for Australia next year.
But ANZ’s Mr Smith made the point today that China would likely provide good support to Australia, as the UK and US economies drag their heels.
The bank is forecasting seven per cent growth in Asia, ex-Japan, next year.
And although China’s growth is coming off the boil it is still expected to remain relatively strong at around nine per cent, despite the global economic and financial crisis.
ANZ is building assets and investments in Asia, which it hopes will give the bank an extended growth platform into the future.
“I am pleased that we are in this region,” Mr Smith said.
Mr Smith said if markets settle down, ANZ will return to profit grown in fiscal 2009.
“If everything stabilises, and we get back on track, then I expect to see an increase in earnings,” he said.